(Recasts with job cuts, CEO interview)
By Rod Nickel
May 6 U.S. fertilizer company Mosaic Co
said on Tuesday it will eliminate more than 500 jobs in the next
year as it reported a larger-than-expected 43 percent drop in
The fertilizer sector has been under pressure since last
summer's breakup of one of the world's biggest potash traders,
Belarusian Potash Co, led to a steep drop in prices.
Transportation problems in North America also dogged the
industry during the frigid winter.
Chief Executive Officer Jim Prokopanko said the Plymouth,
Minnesota-based company will shed 550 to 560 jobs across the
company, using layoffs, attrition, early retirement and
eliminating contractors. It said in October it aimed to cut $500
million in costs during the next five years, bolstering its
status as a low-cost phosphate producer and reducing its
relatively high cost of producing potash.
"We feel we can reduce the spending because we have a
sounder enterprise overall" than previously, Prokopanko said in
an interview. "We've allowed ourselves to grow when times were
good. Now we think we can be just as productive with fewer
Prokopanko said more than half of the jobs to be eliminated
are not directly involved in production, but would not say how
the cuts break down between the phosphate and potash segments.
The company will shed another 200 jobs from previously
announced asset sales in South America and the United States.
Mosaic's job cuts follow rival Potash Corp of Saskatchewan's
move in December to slash its workforce by 18 percent,
or more than 1,000 jobs.
Mosaic's shares fell 2.3 percent to $48.54 on the New York
Prokopanko said the potash market looked oversupplied for
the next three years as demand grows only modestly just as
producers have expanded capacity.
"It could be, just (based on) purely supply and demand, some
tough sledding," he said on an earlier conference call.
Prokopanko said the company will not halt expansion of the
Esterhazy, Saskatchewan mine, but would not comment directly
when asked if Mosaic may close or sell other potash mines.
"We look at our portfolio of assets frequently and we're
always asking ourselves that question, that's all I'll say.
We're looking to maximize production to our lowest cost
facilities and balance the supply with the actual market
demand," he told Reuters.
The company's dividend is secure and it will carry out its
share buyback program as planned, Prokopanko said.
The cost-cutting comes on the heels of two acquisitions.
Mosaic said in April it would buy Archer Daniels Midland Co's
fertilizer distribution business in Brazil and Paraguay
for $350 million. It recently bought the phosphate business of
CF Industries Holdings Inc for $1.4 billion.
"I don't think they're conflicting messages," Prokopanko
said in the interview. "With a cyclical low, you have to trim
your sales, but that's a time you have to have the courage and
the conviction in your sectors to strike when assets come for
Mosaic forecast global potash shipments to rebound in 2014
by 7 percent to a record 57.4 million tonnes. Phosphate
shipments look to rise 4 percent to a record 65.5 million.
"Prices are still bumping along the bottom," but volumes are
starting to return, said BGC Financial analyst Mark Gulley.
First-quarter net earnings fell to $217.5 million, or 54
cents per share, from $379.8 million, or 89 cents, a year ago,
while net sales tumbled 14 percent to nearly $2 billion.
Analysts expected Mosaic, the world's largest producer of
finished phosphate products, to earn 59 cents a share on sales
of $2 billion, according to Thomson Reuters I/B/E/S.
The quarterly results were "outstanding" in the trough of a
market, Prokopanko said.
Average realized prices of diammonium phosphate and muriate
of potash fell 16 percent and 29 percent to $414 and $267 per
tonne, respectively, but came within forecast ranges.
Mosaic said it sold 2.7 million tonnes of phosphate in the
first quarter, flat versus last year but topping its forecast of
2.3 million to 2.6 million tonnes.
The company sold 2.4 million tonnes of potash in the
quarter, within its outlook of 2.3 million to 2.7 million tonnes
and ahead of the year-ago total of 2 million tonnes.
For the second quarter, Mosaic forecast phosphate sales
volumes of 3.1 million to 3.4 million tonnes, up from 2.9
million last year. It said potash sales should range from 2.2 to
2.5 million tonnes, compared with 2.4 million a year earlier.
Prokopanko said in March he has cancer but would keep a
regular schedule as CEO as he underwent chemotherapy. On
Tuesday, he said he felt "fit and well."
(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by
Franklin Paul and Jeffrey Benkoe)